If You’re Not Fixing Someone’s Leaky Pipe, What Are You in Business for?
August 3, 2020
Tuning Your Strategy for Post-Covid Times
“You campaign in poetry. You govern in prose.”
– Mario Cuomo, former three-term governor of New York State, 1983-94
“If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”
– Albert Einstein
“Change does not roll in on the wheels of inevitability but comes through continuous struggle.”
– Martin Luther King, Jr.
My purpose here is to clarify why in today’s C19 downturn virtually every tech company needs to have a clear picture of how they fix critical breakages in one or more of their target customers’ business processes. In order to bring this concept to life it sometimes helps to use a metaphor such as the Leaky Pipe, which I’ll describe further down.
But let me start by describing what the three quotes above have to do with our key topic.
Cuomo quote: It is my belief that tech companies spend too much time rhapsodizing about how they plan to “disrupt” the world – the equivalent here of campaigning in poetry – while they spend far too little time digging into the painful problems that their customers need to fix – in other words, governing in prose. This is critically important for companies to get right because the only potential customers who buy into the poetry are visionaries and there are far too few of them to make a market. Every company needs to engage successfully with pragmatists, who think about their problems in more prosaic terms – “I have a chronic problem, please help me fix it now”. This is even more true during an abrupt and brutal health and economic crisis like today’s pandemic and its painful aftermath.
Einstein quote: Make it your business to dig into your customer’s processes in order to identify what’s broken and develop a new insight about how to help them solve the problem, which to date may have been proven to be quite intractable. If you really want to “partner” with your customers, perhaps you need to more-or-less mimic the approach and behavior of a consulting firm, employing inquisitiveness and mental discipline to fully understand the problem they intend to solve, before developing a coherent plan to address it or jumping into presentation mode with your “solution”..
MLK quote: In most tech companies, even those with competent product marketing professionals, there’s no one tasked with thinking deeply enough about the amount of change that their customers face in order to take full advantage of the technology they are being asked to invest in. Yes, I realize that the change Martin Luther King was alluding to was political and social in nature. But change in business settings often feels equally challenging for vendors and customers to deal with. If you work in tech, make no mistake – one way or another, you are in the change management business.
Companies that Have Fixed Significant Broken Processes – Some Examples
There are a number of well documented examples of companies that have successfully addressed and fixed major broken processes, from Salesforce (broken sales opportunity management process resulting in unacceptable levels of lost deals), to ServiceNow (broken ticketing and call resolution process resulting in low NPS scores and high customer churn), to Shopify (broken shopping experience causing too many customers to abandon their shopping cart). Companies such as Hubspot (broken inbound marketing processes), Atlassian (broken ticketing processes, broken project management), and Fireye (broken digital security processes) have also built successful business by addressing painful gaps in their customers’ processes.
There are also emerging cases of companies addressing problems that have been further fractured directly or indirectly by the Covid-19 health and economic crisis. Below are examples involving three enterprising scaleups.
Swivl, founded in 2010 and based near San Francisco, markets its video collaboration appliance to schools and colleges for distance learning. The company was focused on the professional development (training) market and generating $11m ARR at an annual growth rate of 20% or so. Since the Covid-19 crisis struck, the business has experienced staggering growth above 200% from Q1 to Q2 and now Q3. What explains this sudden growth spurt? In short, Covid-19 has broken the conventional classroom teaching/learning process and is forcing educational establishments to operate in “hybrid” mode due to social distancing regulations. With some students in the classroom and many dialing in from home via Zoom or similar videoconferencing systems, teachers find it impossible to keep students engaged throughout the day, resulting in poor learning, poor discipline, frustrated teachers, and eventually unhappy parents and school principals. Swivl’s appeal is that its appliance focuses in on the teacher as they draw something on the whiteboard or walk around the classroom, then switches to a student who is asking a question in the classroom or in their home, and back again wherever the speaker is, keeping everyone fully engaged. Today, school district superintendents and college principals are moving quickly to install Swivl’s cloud-enabled appliances, hence the sharp increase in Swivl’s business.
Streetbees, founded in 2015 in London, UK, operates a research intelligence platform for major CPG companies like Unilever, P&G, Nestle, and Johnson & Johnson. CEO Tugce Bulut and her team saw that Covid essentially made their customers’ existing market research processes irrelevant, as consumer buying behavior changed overnight away from fashion apparel and luxury items to shopping for basic foods and health/hygiene products, some of which existed and others that had to be created or sourced from new suppliers – such as soap, detergents, hand sanitizer, and other home cleaning products. So Streetbees pivoted rapidly to launch a new service called the Human Impact Tracker specifically designed to focus on the rapidly changing priorities and new buying habits of millions of consumers in countries around the world. In the past four months, the company has garnered dozens of new contracts with existing customers, and new customers, as a result of this initiative.
Since 2018 Zynstra, an edge virtualization software company based in Bath, England, has worked with large convenience and fuel retailing chains in the U.S. and Canada such as Pilot Flying J, Speedway, and Circle K, to address the chronic profitability squeeze caused by low margins and the high cost of serving consumers in a hurry, particularly at peak traffic times. The broken process here is the business can’t keep up with consumer demands, damaging profitability and jeopardizing the viability of these chains. Worse, due to Covid-19 health concerns, hurried customers expect kerb-side service to avoid going indoors, so chains have had to hurriedly reconfigure queuing lanes and checkout systems. By adopting Zynstra’s virtualization software, these chains are able to leverage existing inventory management and POS systems and avoid having to constantly install expensive new hardware to streamline customer service in these new circumstances.
These are just three examples of growing companies that have made it their business to fix something that is both broken and critical; moreover, they have quickly identified new challenges caused by the Covid-19 pandemic. By thinking hard and creatively, they’ve developed critical insights about how to effectively solve the big problem. You have to consider that if only tech companies spent as much time and energy thinking through the full implications of their target customers’ business problems as they do in designing and developing product features, success would come a lot quicker, and to a larger number of companies.
“If only tech companies spent as much time and energy thinking through the full implications of their target customers’ business problems as they do in designing and developing product features, success would come a lot quicker”
It’s worth keeping in mind that the vast majority of tech companies are destined to be niche-market businesses, no matter how ambitious a game they talk in the boardroom, the strategy offsite, or their Powerpoint decks (campaigning in poetry). B2B is all about niche market segments with differing problems and differing needs. And once a young company finds a rich vein of gold to mine in a fertile niche, they can build a $100m+ business out of it. Then they can broaden out into multiple segments using the same process-fixing mindset and playbook.
The Leaky Pipe and Your Customer’s Compelling Reason to Buy
One way that I have found to help clients to relate more easily to the issue of broken processes is to use the Leaky Pipe analogy. It’s a folksy concept and maybe even a little corny but it seems to work.
The “pipe” in this analogy represents an amalgam of your target customer’s various business processes, in which at various times there are elements that fail, causing money to leak out of the company in some form – product designs that don’t work, development that takes too long, going over budget and resulting in lost market opportunity; scrapped projects, cancelled orders, excessive inventory resulting in unsold products, customer service that fails to solve the reported problem(s), longstanding customers that defect to competitors, and so on.
The key is to (a) know which of your customer’s business processes you are best equipped to fix, and (b) to develop key insights about how to fix problems that your customer has tried but failed to resolve.
In short: If you aren’t fixing someone’s Leaky Pipe, it’s time to re-assess your value proposition, and excavate deep into the key business processes of one of your major market segments to look for a suitable leak to fix.
Post-Covid, it’s especially important to take note of any new leaks that have sprung in the pipe, just as the three companies cited above have done. These new leaks could be the difference between success and failure, in the short or even longer term.
If by chance you’ve done enough hard thinking and still can’t identify any critical leaks to fix, that might be a sign that you need to look elsewhere.
The Compelling Reason to Buy
The compelling reason to buy is a crucial concept that is commonly misunderstood and therefore misused. One problems is that, in their enthusiasm to sell, marketing and sales teams find themselves describing their compelling reason to sell rather than their customer’s compelling reason to buy.
For example, the statement “They need a better workflow management system” (because that’s what we’re selling) is not a valid description of a compelling reason to buy. You might think that’s what your customer needs, but you need to map this to their broken process in order to avoid relying on them to figure out for themselves why your workflow management system is what they need now to improve their operations.
So you are on much safer ground if you seek to describe your target customer’s compelling reason to act/buy from their perspective, not from your dying-to-sell-them-something perspective. What do they think is broken and causing enough pain that it must be solved now? What have they tried to do in the past to fix it, and why hasn’t it worked?
It might be helpful to point out a simple structure to define your customer’s compelling reason to buy.
Broken process > Unacceptable consequence or risk to the business = Compelling Reason to Buy
Here’s an example: Sales opportunities mismanaged > Deals lost to competitors and earnings targets missed = “Consistent mismanagement of major sales opportunities results in missed earnings and (sharp) drop in stock price (company valuation).”
The reality is that companies of all types and sizes continually find ways to work around broken processes that they find it hard to fix. And large, successful companies are often the worst culprits because they can afford to throw resources, especially people, at the process to make the problem go away – until, that is, (a) they are reminded about how much risk they are incurring by not fixing them properly, and (b) they can find a feasible way to fix them. This explains in part why large companies make such great customers for tech companies – they have lots of problems, at scale, with lots of expensive leakages of money in one form or another.
Does the Process Have to Literally be Broken or is Seriously Inefficient Good Enough?
Processes don’t have to be literally broken – creaking badly is bad enough. The key question is whether the consequence/risk to the business caused by the malfunctioning process is clearly unacceptable – i.e. causing intolerable pain or risk to your target customer’s organization or business? If the outcome of fixing the problem is some form of incremental benefit, you risk having your prospect defer action until life is easier for them, so it’s far better to be able to point to legitimate “night-vs-day” results that your customer will achieve as a result of fixing the problem.
Remember that, especially during a crisis, customers need to be able to answer three key questions before proceeding with a purchase decision: Why Act? Why Now? And Why You? (The Three Why’s).
What if your target customers’ businesses are on life support?
This may be a statement of the obvious, but you have to be sure that your target customers still have vital signs even if they are suffering. It’s probably not much use today trying to get an airline, hotel chain, or restaurant group to buy your products or services while they can’t see how to make payroll or even whether they’ll be around in six months’ time.
Why Market Segmentation is Always Critical
It’s hard to truly understand, and then set about fixing, your customers’ broken process if you don’t get specific in terms of which market segment you are addressing. Some industries incorrectly described as “verticals” – such as manufacturing or retail – differ from others that superficially look very similar.
Not only are there semantic and terminology differences in business processes between industries, but there are substantive differences in steps in each process, depending on how companies are organized, what products they sell, how their customers buy, and so on. One other key difference between industry segments is that they have their own lingo to discuss their problems, and they tend to congregate in groups of their peers.
Thus, although it is accurate to describe a gas station and convenience store as an example of a “retailer”, so is a grocery supermarket, a restaurant, or a bank branch. But each of these businesses serves very different needs, handles their customers quite differently (with low-touch or high-touch strategies), sells/delivers different products and services – and these differences can be significant – such as managing financial transactions at a bank branch vs. selling produce in the grocery store.
Back to the statements attributed to Cuomo, Einstein and MLK. During the current period of generalized economic uncertainty, along with a stirring vision of how your company is going to change the world, it’s worth making sure that you are dialed in on the prose of fixing a painful broken process, and that you have thought deeply enough about your customer’s processes to develop unique insight about how to help them in a material way. And be sure to consider the change that your product will inevitably require of your customer if both you and they are to achieve the desired outcomes.
Finally, don’t be surprised if you need to rethink and refresh your strategy more frequently than you might expect, while every country and every business around the world continues to gauge how to navigate their way through the Covid crisis.